Amendments to Seed Enterprise Investment Schemes (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)

Wed 18 Mar 2015

In the Budget the Chancellor announced that the Government will make amendments to the SEIS, EIS and VCT legislation to ensure that the UK continues to offer significant and well-targeted support for investment into small growing companies, in line with new EU rules.

The new proposals are subject to state aid approval and the likely commencement date is therefore not known at this time.

The Government intends to legislate to make the following changes:

• require that companies must be less than 12 years old when receiving their first EIS or VCT investment, except where the investment will lead to a substantial change in the company’s activity;
• introduce a cap on the total investment received under the tax-advantaged capital schemes of £15 million, increasing to £20 million for knowledge-intensive companies; and
• increase the employee limit for knowledge-intensive companies to 499 employees (up from the current 249 employees).

In relation to the last point it will be interesting to see if that change (from under 250 employees to under 500 employees) is also then subsequently reflected in a mirror extension to the eligibility criteria for the Enterprise Management Incentive (EMI) share option plan (which hitherto has largely followed EIS eligibility criteria). That would certainly be most welcome but the press releases today do not purport to take the change that far.

The Government will also smooth the interactions between the schemes by removing the requirement that 70% of the funds raised under SEIS must have been spent before EIS or VCT funding can be raised.

Author: Liz Hunter